Detroit's move, considered to be the largest muni bond bankruptcy filing involving upwards of $20 billion in debt, creates an element in a doubt in a market that hates doubt.

The iShares S&P National AMT-Free Muni Bond exchange traded fund, a measure of municipal bonds across the country, is down 7.9% this year. Certainly, not all that decline is Detroit's fault.

Rising long-term interest rates in general this year have been a huge headwind for municipal bonds. The Vanguard Total Bond Market ETF which includes bonds of all stripes, mainly U.S. Treasuries, is down 4.6% this year.

Still, what's going on in Detroit has major ramifications for municipal bond investors. Investors used to be willing to accept low interest rates on muni bonds, given their tax advantages and their long-track record of being extremely safe.

But now that the safety issue is at least being brought into question following Detroit and other problems, investors may demand higher returns, lower prices and cities might have to pay up a bit more. Much will depend on how Detroit's problems are ultimately resolved.